Adviced needed on Private Money lending

[Corey Owen]

Hello Bigger Pockets! I am in need of advice from investors that use private money for their purchase/rehab of homes. I have an investor that interested in backing us on our next venture and we are collectively trying to figure out what type of documents need to be drawn up to protect both us and the investor. Here are the questions that have come up so far and please feel free to let me know anything that I may have forgotten as well.

1. Is there a way to have a contract written in advance that we can simply turn into the closing attorney that shows the terms or do we need to contact each closing attorney and given them all the specifics of the loan i.e loan term, origination fee, interest rate, etc? The advice we were given by one closing attorney was to contact each one we use and give them the info

2. We want to be able to make cash offers on properties to increase our likelihood of landing the deal. How would we show the money in their account as proof of funds without requiring them to be on the title. Do they have to put money in an escrow account that we also have access to for POF?

3. Once we have agreed on the property and terms and want to close how can we ensure on our end that once they fund the purchase into the closing attorney escrow account that they then can not back out of the deal. I have been told that there is no way when they send money into an escrow account to close on a property that we can "force" them to close. I am imagining a worst case scenario where we come to the closing table ready to purchase the property and the investor has cold feet and withdraws the money from escrow and we are stuck losing our deposit.

4. How do you deal with funds for the renovation? We have agreed that we will do weekly/ biweekly disbursements after they have received receipts and inspected the property, but is the money held in an escrow account or is it better to have the investor wire or write a check? Will a typical closing attorney hold money in escrow that they disburse? Are there fees associated with this?

5. How is interest on Reno loans typically calculated. An example would be that we agree to a 25k reno budget. The money is disbursed in 3 payments at 1 week increments. We end up only using 22k. Do we pay interest on the 25k or the 22k? Is it calculated from day of closing or from each disbursement period?

6. Is repayment on the back end typically calculated by the closing attorney or do we need to figure out at the end, most likely on the reno portion of the loan?

Any other questions I should be asking please let me know. If you have a case study you could walk me through that would be great. Thanks in advance!!